http://tvnz.co.nz/business-new...

A high-profile lawyer says the Serious Fraud Office would have been conscious about continuing to spend public money in their decision not to proceed with charges against the directors of Hanover Finance.

Queen's Counsel Brian Keene said he was not surprised the SFO had chosen not to pursue with charges.

He said the SFO would have been conscious of continuing to spend public money by pursuing with fraud charges when they were not confident in the quality of their evidence.
[..]

Hotchin and Watson are also pursuing Shareholders' Association chairman Bruce Sheppard for several million dollars of damages over comments he made in 2009, alleging the pair acted improperly in relation to the debt restructuring of Hanover Finance.

Hotchin comes out swinging on 'ill-conceived' FMA case

Former Hanover Finance boss Mark Hotchin is challenging the Financial Markets Authority to prove the failed finance company’s investors lost out for any other reason than the collapse in the New Zealand property market and the global financial crisis.

Mr Hotchin took the unusual step of releasing a press statement which he said summarised a Statement of Defence filed with the Auckland High Court on July 31, in response to charges laid by the FMA from an investigation that began more than four years ago.

Hanover froze repayments in July 2008 on $296.5 million of investors’ funds, at a time when it claimed $550 million of assets.

The FMA action only pursues redress for depositors who invested $35 million with Hanover between December 2007 and July 2008.

Mr Hotchin has become a target of investor anger, in part because of the lavish lifestyle he was pursuing before the collapse – including the construction of a $43 million home in one of Auckland’s most exclusive harbourfront streets, Paritai Drive – and his role in a failed bailout deal with Allied Farmers in which investors swapped Hanover debt for Allied Farmers shares.

“The defence records that investor claimants would each need to show they invested on the faith of the relevant offer document and in reliance on particular statements FMA has alleged as untrue, and that any loss or damage was a result of the specific statements and not intervening events such as the GFC, deterioration in New Zealand property markets, the Hanover debt restructure or the Allied Farmers transaction.”

Mr Hotchin helped Allied Farmers principals tout the ill-fated sale of Hanover’s assets to Allied as a rescue plan for investors in late 2009. However, subsequent write-offs on the value of the Hanover assets saw the deal turn sour.

He will argue in court that “the facts of this case are completely different from other finance companies that have come before the courts, and the directors are confident they will not be found liable”.

“The boards of Hanover issuer companies actively monitored liquidity levels at every board meeting and, until mid-July 2008, were at all times satisfied with actual forecast cash levels and liquidity buffers and that the Hanover companies were being managed and assessed in a prudent and satisfactory way.”

Mr Hotchin said Hanover directors believe the FMA is relying “on incorrect information in a forensic accountant’s report that the FMA refuses to release to the directors”.

“This is resulting in an ill-conceived and expensive piece of litigation,” he said.

Successful prosecutions of the directors of a range of failed finance companies are mounting up, with some directors still arguing they fulfilled their fiduciary duties to investors at a time when market conditions were changing very rapidly.

Convictions against the directors Lombard Finance, including former Justice Minister Sir Doug Graham, are being appealed.

Hi Damien,

"It makes no difference to the underlying issue, which is Dotcom guilty of copyright theft?"

No, it doesn't. But that isn't the issue in question, which is that given the circumstances and the information available to the police, whether or not the raid on the Dotcom mansion was justified.

"I’ve been involved in removing people from their land, closing down sites etc, and you never know what you are going to find. We work on the rule, in a hostile or unknown situation, of four of us for every possible other person on site. It is overkill but you want that."

Of course, you want recourse to the necessary resources to deal with potentially ugly situations. However, I don't see how this can provide any justification for the use of force for arresting someone convicted of a property crime such as Dotcom, other than simply having a firearm or two in the back of a police car (and being able to mobilise police resources quickly).

Generally, the police should work on the principle that their use of force should be proportional to the violence that they can rationally expect; it is this principle that means that Armed Offenders' Squads are not usually used for, say, traffic violations and instead for people charged with firearms offences. While this can certainly lead to mistakes if the police under- or over-estimate the risk level of who they're dealing with, I can't see how the display of force by the police in raiding Dotcom's mansion, in the knowledge that he had no previous conviction for violence nor was under arrest for a violent crime, could be justified - or considered a "mistake."

It makes no difference to the underlying issue, which is Dotcom guilty of copyright theft?

The decision to have considerable force available when the police went to the site was a tactical decision by the officers making the arrest.

I’ve been involved in removing people from their land, closing down sites etc, and you never know what you are going to find. We work on the rule, in a hostile or unknown situation, of four of us for every possible other person on site. It is overkill but you want that.

It is easy to be critical in hindsight and remember they wanted to try and grab evidence, so speed was important.

It does appear to have been a cluster but that was due to the lack of process by the Crown and not the officers on the day. Anyway, the flaws in the police case are hurting them now, which I think shows that the process, mostly, works, and that when the state makes a mistake it is open, transparent, and people can be held to account.

Not, in otherwords, what happens in other nations.

"Well, in exercising that the state, like any actor in the nation’s affairs, is from time to time going to get it wrong."

Dotcom wasn't wanted for a violent crime and had no history of violence, in which case a police raid may be warranted. With this in mind, how could the police raid on his mansion be considered an instance of simply "getting it wrong"?

Has an interesting Dotcom piece up this morning, regarding the police (state) ineptitude: http://www.nzherald.co.nz/opin...

I'll meet you mainly part-way on that reply. Though I'm not remotely comfortable with the state getting it wrong with 70 assault rifles. That was a nonsense.

And again ... I'm not presuming Dotcom's guilt of IP theft: or if he's guilty, then you may as well throw the key away on every ISP.

If I was on his jury I would drop my prejudice and consider the issue objectively.

As I am in the peanut gallery I feel entitled to throw peanuts.

You believe that the state has a legitimate function to protect property rights. Well, in exercising that the state, like any actor in the nation’s affairs, is from time to time going to get it wrong.

So be it. Those who get it wrong must pay the cost of getting it wrong, and hopefully learn from their mistakes next time. We must not prevent things from happening because of a fear of mistakes.

Some of us are better at this learning than others.

It isn't?

If those raids were illegal, then no evidence garnered in that raid is admissible for Dotcom's prosecution. Chances of that happening? I suspect nil. The court will find a way around the state's incompetence, or, more likely, just ignore it. Regardless, the jury is still out on the judiciary in this instance. (And it's only one instance).

And by the way, everyone here is assuming Dotcom's guilt. I don't think his business model leads to such a clear-cut judgement at all. And look at Steve Wozniak's defence of Dotcom. The Fat Man's been hung out by Muddle Man without a trial ... that's the vigilante mentality.

about Beyonce than Dotcom and not just for the obvious reason. She is a creator, he is a thief.

Yes, the state over-reacted but that is the beauty of the independence of the judiciary and something that those who have inherited the Westminster system must thank those who have fought and died for this.

We had this debate some time back I think. I said that we have a judicial system that will haul the state back into order. You were doubtful, stating that the judiciary was an arm of the state.

Clearly, it isn't!

But what of 60 to 70 police with assault rifles, helicopters, etc, to raid a family home for a non-violent crime? And why would they have not made sure the paper-work was not scrupulously in order - I say arrogance because they are used to operating above the law? They had more manpower and firepower on this raid than to take down a bikie gang, for Rand's sake. They were keystone cops acting like children.

I have no truck with IP thieves, but what about when the men in black come for you simply because you're posting here (a site which, I think Marcus recorded, is blocked in some Western countries)?

Or, are we saying, without a trial, stuff him, he's a thief, the state can do anything to him they want?

the man is a thief, plain and simple.

The fact that Mrs Connell screwed up does not change that fact.

The entitlement generation believes that, in addition to not having to pay for education, health care, or indeed even their rent and board, they should not have to pay for their movies and music.

That Dotcom is a modern Robin Hood is appalling and says all that you need to know about the entitlement mentality we live with.

Yes Linz, absolutely. I hope I've not done one post about Hotchin without stating he may be an immoral bastard, and not one post about Dotcom, without affirming my absolute belief in IP as property. But, both those issues are ultimately for a court to decide on the facts. My sole concern has been about how for coming up to twenty months one of these men has still not been charged for any crime, and how the second man was 'taken out' by overwhelming force, for a non-violent crime. Both being unparalleled abuses of state power. If you like, I may hate what they say/do, but would die fighting for their right to fair trial (a trial), or not to be bullied by inappropriate force. If the state can do this to them, or this bullshit to a sap accountant - http://www.newstatesman.com/bl... - then they can do it to me. And referring to the accountant link, then even my blog, or this site, might be considered as anti-state as his silly tweet, indeed, much more so.

Last time I checked we (apart from Dick Baade) believed in property rights.

I believe in property rights.

How about—just for a change—refraining from misrepresenting my views? Thanks in advance.

(Of course, I don't believe in *intellectual* property rights. Last time I checked, there was no such thing as IP—except as a legal fiction.)

I'm not rejoicing for Dotcom. Best I can tell he's a thief, who was, when he thought it served his interests, a Banks brown-noser. The finding against the police says the warrant on which they acted lacked specificity. Fair enough. That's tantamount to unreasonable search and seizure. But let's not embrace, or be seen to embrace, profiting from piracy. Last time I checked we (apart from Dick Baade) believed in property rights.

Yes, I'm onto it, Gregster: currently battling away on NBR: http://www.nbr.co.nz/article/d...

Look at top comments

I wrote below They have no case against Hotchin, and very little on Dotcom, IMO.

Today the Kim Dotcom police home invasion was adjudged just that.

Justice Winkelmann has also ruled it was unlawful for copies of Dotcom's computer data to be taken offshore.

I’ll bet Hotchin will, too, take the authorities to court over their police state blunders.

The Dotcom story so far is America's keystone cops acting on advice from politicians and advising our keystone cops, who also were leaned on by our pathetic pollies.

Given FMA only seem to have an (inappropriate) civil case, no criminal case from SFO, Hotchin has again unsuccessfully tried to get his freeze lifted.

http://www.stuff.co.nz/busines...

So no case of fraud, and despite his three co-accused having no freezes, his freeze remains.

Only logical reason? FMA simply sees its role as facilitator of the lynch mob who hate Hotchin because he is Hotchin.

Arbitrary government. Disgrace by any other name.

Pretty good piece concerning these themes by Cathy Odgers (aka Cactus Kate) in Herald: http://www.nzherald.co.nz/busi...

This FMA is a confusing mess growing the State where it has no right to be.

I have been beating on this drum for a while now.

March last year, even before I found this haven of unsafe thinking...

http://www.nzherald.co.nz/busi...

I said at the time "The Hanover investors are now crying foul and demanding taxpayers' money be spent chasing Hotchin and company. There are better calls on the public purse."

Sadly, such rants have no effect, but it feels good to say it.

Yeah, well if Whaleoil wasn't so blinkered, almost as if he's a National voter, he could've got the real oil from my posts on SOLO an age ago, and without all the muddle. I've linked this post from his blog previously.

It was one of Damien's good ones.

http://www.whaleoil.co.nz/2012...

My first chance to have a decent look around Net for a while, and I see Damien has almost 'got it': http://www.nzherald.co.nz/opin...

Holiday toll so far: one big snapper, one rod broken completely in two. Plus I've finally made progress on a private project I've been wanting to get my word processor into for a long time.

Cross post to Kim Jong Hickey's thread on same: http://www.interest.co.nz/news...

A civil action by a government department, such as this, flies in the face of the rule of law and is completely inappropriate. Hotchin now enters his sixteenth month of life frozen by an out-of-control State, and it appears the State never had a criminal case of fraud. That is the only point of consequence to take from this whole sorry saga. The abuse of power of the State.

And for the record, no, I'm not defending Hotchin. I'm defending something much more important: my freedom ... and your's.

(Link back to this post).

... gone the completely inappropriate path of the civil case:

http://www.nzherald.co.nz/busi...

Okay then, so if my tax money is used for civil action on behalf of investors of Hanover, then why not every other investment company that has gone down? There's no tidy division from the State to ... well, anything anymore. I suggest investors of all other failed finance companies ring their MP's on Monday.

Also, Joe Blogg plumber down the road went through last week, owing a bunch of local creditors: same principle - I expect the State to take a civil case here also. Hell, we'll only need another 50,000 bureacrats.

... the civil case between investor and institution is no place for government; it's a private, civil matter only. The only place for the State under the rule of law here was the criminal case of fraud if there was one: apparently not. So why Hotchin's now sixteen month asset freeze? This is nonsense and heads should role for the vast increase of State power that is given through this civil prosecution.

They have no case against Hotchin, and very little on Dotcom, IMO.

The 'prosecutors' should be on trial, and Hotchin will have their arse, given time. If we lived in a just country.

Looks like the Government through FMA are going the civil route: http://www.stuff.co.nz/busines...

Lawyers for the Financial Markets Authority have told Mark Hotchin that the regulator is poised to file civil claims against him and other directors of Hanover Finance within a week.

For all the reasons stated in my header post above, FMA taking a civil case flies in the face of the rule of law. The only role for the State vis a vis Hotchin and Hanover is on the criminal matter of fraud. It should not be prosecuting a case on behalf of private investors; that is not the role of the State. And the fact they don't seem willing to pursue criminal charges implies they can't have had a good case for fraud, and right from the beginning; so why has this man had his assets frozen for 15 months?

Following the precedent being set, do we now assume my taxpayer money is going to be spent by the government pursuing civil charges on behalf of investors who've lost money in all of the finance companies that collapsed? Even though I had the good sense not to put my money there? If not, why not? If we throw away the rule of law for Hanover, why not all the others? It's arbitrary government anyway, anything goes, right?

He read the synopsis of my post, per my email, plus the link to here, on air, vis a vis a talkback he was doing on Dotcom, and rule of law issues in New Zealand (particularly abuses of by the State). I'm not on all fours with him, but would agree on 90% of his content, plus he does a good show. I suspect he'd say the same about libertarianism - he would differ on that hoary old game-breaker, drugs, and I've got this notion he might be more the conservative regarding religion (but not sure on this one). Very Libertarian otherwise.

... depth on the issue in the way it relates to Kim Dotcom: http://asianinvasion2006.blogs...

From: http://www.nbr.co.nz/article/s... (Paid content).

The Serious Fraud Office is still months away from deciding whether to lay charges against those involved in Hanover Finance.

The length of time taken means no justice is possible for any party.

And 'deciding whether' (or not) to lay charges still, after Hotchin's over one year asset freeze now, is an abuse of State power of the highest order. Again, I would expect this offensive nonsense in Putin's mafia Russia, not in a free country.

Nico said to me:

... why is it you appear more concerned about Hotchin's frozen assets than the 16000 investors, many of whom have lost their life savings? Yes, there may be an issue about the asset freezing, in the same way as there is an issue about capital punishment for murderers and rapists. But first things first. Those poor people that have lost their savings so unfairly and need help from the FMA and it seems fairly clear where responsibility ought to lie. Once those victims have been sorted we can indulge in the luxuries of debate about the constitutional rights of Mark Hotchin.

My reply:

I'm not more concerned about Hotchin than the 16,000 investors. You're reading what you want to read, not what I have written.

I am concerned about something much more important to every single one of us: the rule of law, and how successive governments are running roughshod over it. Hotchin is just one example of it, though for me has become the litmus test. In the same area, Kim Dotcom in my opinion has become the victim of arbitrary decision making by a philosophically bereft judiciary, regarding his bail, and I won’t even mention the thuggish behaviour of the keystone cops who raided him and his nannies. And if you then want to scope outside of that, the almost Stasi like powers of snooping, search and seizure given to IRD, and soon, for Rand's sake, Food Safety Officers, are far beyond the powers the State should have taken for itself in a free classical liberal society. The latter of which, of course, we are not, and that’s the biggest issue in New Zealand, and the West, today. The judiciary in New Zealand have become the mindless defenders of the might of State to interfere in every individual’s life, property rights and freedoms, not the defender of the individual against a State unhealthily over-reaching itself.

The rule of law; an individual's freedom from an abusive State, is not some ‘luxury’ you deal with after 'sorting out the investors of Hanover': it is the a-priori position to everything that should've been defended, but which the tyranny of the majority, reliant as they've become on the Nanny State, have given up in my damned name, to those incompetents in the State service who think they have some special vocation to run my life for me. And they don't. I wouldn't let most of them walk my dog.

And where are the civil liberties lawyers like Peter Williams championing these crucial issues? You’re right, perhaps if Hotchin had been a rapist or a murderer, from a bad, sad, background, he’d have had a better shake of the arbitrary whims of those who continue to treat his life, and the lives of his family, like a plaything, to make their public service careers on as if they had all the time in the world (which in New Zealand circa 2012, if representing the State - now the enemy of the individual - apparently they do).

From a paid link on NBR (thus no use putting link up). Quoting portions only, 3 February, 2012:

FMA drags chain on Hanover

Much-heralded court action by the Financial Markets Authority against Hanover Finance appears stalled.

On December 15 the FMA announced it would be filing civil proceeding against the directors and promoters of Hanover Finance.

The regulator said their case would focus on the finance company’s 2007 prospectus, during a period where $35 million was raised from investors.

Media reports said Christmas leave for many staff at the FMA had been canceled to push through the paperwork required for court action against Hanover.

The announcement followed building pressure against the FMA to resolve its investigation into the finance company after a December 2010 freezing order obtained by the regulator against Hanover director and co-owner Mark Hotchin stretched into its 12th month..

But, seven weeks on from the announcement court action would be filed, the FMA have no developments – or even a timeframe – to report.

A spokesman for the FMA told the National Business Review there was no update to the Hanover case, and nothing was likely to be made public in the next fortnight.

Say what you will about Hotchin, his asset freeze without even the sign of a charge, continues well into it's second year. All free men in New Zealand should rightly be first appalled, and then alarmed. This is a complete abuse of State power, whether it be by simple incompetence of the bureaucrats involved, or worse, by design.

This is becoming more interesting, if not alarming. According to FMA head, Sean Hughes, quote:

Hughes underlines that the Hanover investigation has not revealed the same scale of alleged misconduct that was apparent in, for instance, Nathans Finance.

"We're not talking about wanton reckless misconduct."

And yet Mark Hotchin has had his assets frozen, and continues to have, for over a year now?

That's an unacceptable breach of the power of State, on the face of this comment. With that this week, and Herr Brownlee threatening to fire elected councillors in Chch at his whim, it's been a bad week for freedom in New Zealand.

I posted a link to this piece in a comment to O'Sullivan's article in the Herald: they posted only part of that post, deliberately editing the link to here, and notes on it, out. What a gutless MSM we have. Also posted to Cactus's thread, and she certainly put the link up.

To borrow a phrase from a well known SOLOist, Cactus Kate speaking through Fran O'Sullivan on Hotchin's freeze, and the current actions of FMA: http://asianinvasion2006.blogs...

Do FMA or SFO actually have a case against Hotchin?

You can see the day coming when the state will bar all forms of civil action, set up a schedule of compensations, and tax the population to pay for it.

The really frightening thing about this idea is I suspect well over half of Kiwis reading it, would love it, and vote you and me into such a new bureacracy. Indeed, it'd probably be an election winner. I hope Shearer, the man who has gone from negotiating down the man with the gun, to the man holding the gun, doesn't read this thread.

You can see the day coming when the state will bar all forms of civil action, set up a schedule of compensations, and tax the population to pay for it.

Yes, certainly in the field of finance and investment. And this FMA civil suit is the start of that.

NZ has a no-fault accident compensation system that effectively prevents (outlaws) torts where physical injury results. That is, if you are injured, for instance, via a car accident, then the state assumes responsibility for your costs and you cannot sue for damages, although the offender may be subject to criminal penalty. This system is funded by levies on car registration and via deductions from wages.

This is quite wicked, but it's a prime example of what's known as tort reform. It's also a major cause of moral hazard.

You can see the day coming when the state will bar all forms of civil action, set up a schedule of compensations, and tax the population to pay for it.

A civil case, by definition, is launched by *civilians* against others.

I'm no legal scholar, but a civil case surely involves a tort: the seeking of compensation for personal injury. If the wrong was a breach of contract between parties, then it could be enforced under contract law between the parties concerned.

But to have the state invoke a civil action (that is, something that is not an actual crime), then surely the state must have been subject to a personal injury or a breach of contract, and the state would have had to have been a party to such a contract.

The propriety of this may well have to be decided in the supreme court, and here I'm assuming that there will be a third party who will challenge it. Certainly the state or the investors will not as it's in their interests to proceed.

And if the state can take civil actions, then surely it will be under an obligation to take them for all such cases where injury has been done but where no crime was committed.

Your logic is possibly right, Gregster, though the SFO is still to report (I'm assuming), but that doesn't change the fact the FMA should not be making the civil claim: if the prospectuses held fabrications, then that's a criminal matter of fraud, and it's down to the SFO only. Surely that's the only legitimate role for the State? The FMA is a 'worrying' new branch of State power in New Zealand, especially when, already, less than a few months since its inception, its muddying the waters like this by taking the civil case.

Though my real concern still remains my point (2). Still no criminal charge from SFO on Hotchin after one year of his asset freeze. I see that as little different, in principle, to one years detention by the State without charge or trial: imagine the furor we should be seeing about that?

Good stuff.

It could also mean they don't have evidence sufficient for the normal prosecution. And they are putting on the pretense of this being the angle to take to perhaps settle out of court. Get something instead of getting nothing for helpless 'Mums and Dads' by losing the criminal case, and paying Hotchins compensation.